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Payment and financial services unicorn PhonePe on Thursday said it raised $350 million in funding at a pre-money valuation of $12 billion from private equity firm General Atlantic. Other Indian and global investors also participated in the round. 

This is the first tranche of an up to $1 billion total fundraise the company commenced starting this year. 

The latest valuation puts PhonePe in the decacorn club (a term used for startups with a valuation of over $10 billion), along with its peers Swiggy, Flipkart, Paytm, and BYJU’S.

PhonePe will use the funds for investment in infrastructure, including the development of data centres and building financial services offerings at scale, it said in a statement. It also plans to invest in new businesses, including insurance, wealth management, and lending.

“We are an Indian company, built by Indians, and our latest fundraise will help us further accelerate the Government of India’s vision of digital financial inclusion for all,” said Sameer Nigam, Founder and CEO, PhonePe.

“We look forward to delivering the next phase of our growth by investing in new business verticals like insurance, wealth management, and lending, while also facilitating the next wave of growth for Unified Payments Interface (UPI) payments in India,” he added.

Last year, the IPO-bound company made public that it was changing its domicile to India, and in December, it announced its full separation from Flipkart. The PhonePe Group was acquired by the Flipkart Group in 2016.

These announcements follow PhonePe’s decision to list on the bourses, which it intends to do in the near future “after turning its core business profitable”.

“Sameer, Rahul, and the PhonePe management team have pursued a clear mission to drive payments digitalisation and significantly broaden access to financial tools for the people of India. They remain focused on driving adoption of inclusive products developed on the open API based ‘India stack’,” Shantanu Rastogi, Managing Director and Head of India, General Atlantic, added. 

PhonePe’s late-stage funding is significant for a couple of reasons. First, it comes amid a prolonged funding winter following tough global macroeconomic conditions, and second, the regulators have tightened scrutiny over the fintech sector, making a lot of firms walk on eggshells.

However, as a relief, the fintech company has extended the deadline for third-party apps to comply with its market share guidelines on the UPI network by two years. PhonePe commands over 40% of the UPI network in India.

What’s in the offing? 

Founded in 2015 by former Flipkart executives Sameer Nigam, Rahul Chari, and Burzin Engineer, PhonePe claims to have over 400 million registered users and is a leader in the payments segment. 

Since its venture into financial services in 2017, the app has introduced a series of offerings, including third-party mutual funds, insurance products, tax-saving funds, liquid funds, international travel insurance, and life insurance, besides utility payments. It has also applied for mutual fund and payment aggregator licences. 

In September last year, media reports said the company was looking to launch its own payment gateway as an extension to its current QR code-based UPI payment service and in-app payments.

Recently, it acquired the BNPL platform ZestMoney to tap into the lending segment. 

Expanding its suit, the digital payment firm has also acquired GigIndia (Pune-based marketplace for gig workers), WealthDesk (investment platform), OpenQ (wealth management platform), and IndusOS (homegrown app and content discovery platform) as part of its bigger plan to create a superapp. 

PhonePe intends to integrate hundreds of thousands of Indian apps such as Indus App Bazaar into its PhonePe Switch, which already has a few mini-apps integrated into the platform. 

For FY22, PhonePe reported a net loss of Rs 2,014 crore, which widened from Rs 1,729 crore in FY21, while the revenue from operations surged to Rs 1,646 crore. The expenses also ballooned to Rs 3,705.6 crore. 

On a unit level, PhonePe spent Rs 2.25 to earn a rupee in FY22. The company aims to turn its core business profitable in 2023. 

While PhonePe is valued at $12 billion, its listed rival Paytm is trading at a market capitalisation of $4.24 billion. The Vijay Shekhar Sharma-founded fintech company also reported a net loss of Rs 2,325 crore for FY22, but its revenue surged to Rs 3,892.40 crore, higher than PhonePe.